Shares in Caltex Australia (CTX) (50% owned by US oil giant Chevron) ended higher yesterday despite a downgrade to the company’s half year earnings.
The shares fell to a low of $21.07 after the statement was released just before trading started at 10am.
But that fall was quickly reversed as investors read the release and discovered the downgrade was marginal, and driven by one-off factors such as the company’s impending closure of its Kurnell refinery in Sydney.
By the close the shares were up nearly 1% at $21.77, a rise of 18c on the day.
Caltex said that on an historic cost basis (the normal method of accounting), profit after tax for the half year ending June 30 is expected to be between $150m and $170m, lower than a $195m profit in the half-year to June 30, 2013.
Caltex reported a fall in first quarter profit in May and blamed the high dollar and the changing nature of industry demand and supply, plus the impact of the closure of Kurnell.
"The half year outlook includes forecast product and crude oil inventory losses of approximately $5 million after tax, compared with product and crude oil inventory gains of $24 million after tax for the half year to 30 June 2013," the company said in the statement.
On a replacement cost operating profit basis, Caltex’s preferred way of reporting, the company said it expects profit after tax between $155m and $175m, compared with a $171m profit in the first half of 2013. The replacement cost basis strips out the impact of price changes on the value of its oil and product inventories.
CTX 1Y – Caltex’s small downgrade doesn’t upset market
Caltex said its marketing business is expected to deliver earnings before interest and tax of between $390 million – $395 million for the six months to June 30, compared with $365 million for the same period in 2013.
"The first half 2013 Marketing result included two one-off impacts (the significant fall in the Australian dollar and the Sydney premium gasoline interruption) of approximately $11 million," the company said in yesterday’s statement.
"After normalising for these events, Marketing continues to deliver strong underlying earnings growth of about 5%.
"The first half forecast result excludes the earnings impact of the Scott’s Fuel acquisition, which was completed on 4 June 2014, and the Sydney bitumen business, which was sold in December 2013," Caltex said.
The company’s refining and supply business is expected to make a replacement cost basis loss of between $65 million – $85 million, "which is greater than the prior corresponding period RCOP EBIT loss of $43 million" the company said.
"This result includes a number of one-off Kurnell refinery production impacts as Kurnell makes the transition from refining operations to a leading import terminal.
"These impacts to Kurnell production mix and yield were anticipated and are the natural result of operational constraints during the shutdown and conversion process.
"The Kurnell conversion project continues to progress to plan. The refinery has made its final crude oil purchase and remains on track to cease final operations in the fourth quarter of 2014.
"Operationally, production of transport fuels will be approximately 5.3 billion litres for the first half of 2014 (1H 2013: 5.1 billion litres). The increase is due to improved Lytton refinery production, which has been supported by strong operational and yield performance.
"The improved Lytton production has been offset by lower production from Kurnell refinery due to the conversion process," Caltex said yesterday.
